‘Every time there is a recession, companies that survived have come out stronger’

Eaton Fluid Power Ltd (Hydraulics Group) is a leading company in hydraulics for both mobile and industrial applications. The company produces not only some of the world’s best hydraulic products, but also some of the best and most complete hydraulic services, systems and solutions. Subhasis Chatterjee spoke to Sandeep Menezes on growth prospects in this segment of the equipment industry.

The equipment industry is not witnessing growth. Is there increasing pressure from OEMs to lower prices?
The equipment industry is not growing currently and in this scenario more players are fighting for lesser available business. Naturally, there is a price pressure which is generally linked to margin pressure. I think that OEMs are under tremendous pressure from the market. It is a value chain that gets passed on. At the end of the day, it makes OEMs and suppliers leaner and stronger. Every time there is a recession the companies that survived have come out stronger.

The rupee has also depreciated hugely in recent months; therefore, it is a huge opportunity for us to target the export market. Now companies are forced to look at localisation of their products. Earlier we used to procure from abroad and sell in this competitive market while still making a decent margin. Now some suppliers have localised while others have not. But OEMs are stating that they don’t care about rupee depreciation and are not bothered if we have not localised while competitors are localising. Therefore, all suppliers are forced to implement localisation of their products.

What is the level of localisation achieved by Eaton? Do you intend to increase it?
A large portion of our products or components are still imported. Localisation is a continuous process and we are doing our best. We are going to customers and understanding their needs and then depending on the market-size of that product segment, we are localising. Many pumps, valves, steering control units etc. that we are localising were earlier being procured from Japan, China or Germany. Over a period of time we will localise more and increase our exports from India.

What is Eaton’s current quantum of exports?
Currently, our exports are very little. For a big company like Eaton, it becomes difficult because we are everywhere. Today, Eaton has presence in nearly 175 countries. Therefore, everyone operates within their own given territory. We have to find out new markets within India. There are also many underserved markets within the country, which we intend to cater to.

Also, people who were into manual are now getting into hydraulics. Like a customer who used manual steering, then went for mechanical steering and now wants to use hydraulics power steering. In future, he will use electronic steering. Therefore, over a period of time everybody is upgrading. There will be migration all the time. We have to use these areas of opportunities to look at how more people can be upgraded.

How has growth been across the hydraulics segment?
A cannibalisation is seen in the equipment manufacturing market. It will be the survival of the fittest. The construction segment is not witnessing growth but within construction there are several platforms. Backhoe loaders are multipurpose machines while excavators are a very specific machine for digging. More and more specialised machines will be coming into India. If you are in the correct segment with proper solutions, innovation of processes and customer centric, then you will still find growth.

What is Eaton’s future strategy in the hydraulics segment?
We want to grow and outgrow the growth of the market. Innovation remains one of our core principles or values. We have new products like hoses, pumps and motors for excavators market, steering control units for backhoe loaders and wheel loaders etc.